Department stores confront slow economy and online sales

A shopper with a telltale bag walks outside a Macy's store in San Francisco in 2013. - Justin Sullivan/Getty Images

Clothing was a bright spot in the latest government figures on retail sales, so how are department stores doing? A slew of them report earnings this week.

Daniel Butler, vice president of retail operations for the National Retail Federation, says department stores are outperforming the broader retail industry “in the face of the sequester, and despite the fact that we had colder spring weather and an early Easter.”

But there’s one factor department store chains can control: the internet. Maxim Group retail analyst Rick Snyder says the most successful department stores are figuring out how to make online sales help -- not hurt -- their offline business.

Take Macy’s, which has started filling website orders directly from stores rather than warehouses. The arrangement can save time by cutting out one shipment step and save money by allowing Macy’s to manage its inventory more flexibly.

“That gives them the opportunity to sell something at full price that may have been marked down in their store,” Snyder says.

Instead of putting a dress on a sales rack, a Macy’s in, say, Cincinnati can send that dress to a customer in St. Louis, who may have paid full price online.

“Whether it’s shipped from Cincinnati to St. Louis, as long as it’s there the next day the consumer doesn’t care,” says Snyder. “That’s seamless.”

By the end of the year, more than half of Macy’s U.S. stores will also be online distribution centers.

Stan Alcorn

Stan Alcorn is a reporter based in New York City. In addition to his work for Marketplace, he has reported for Fast Company, WNYC and NPR.